One Day is Not Enough
As we watch short-term charts, it is too easy to forget the context of our trades. In this case, yesterday’s data. The first hour produced a narrow range, and many traders thought the market was already waiting for tomorrow’s Fed announcement. (Maybe I’m just projecting my morning thoughts.) But the major rule is “trade what you see - not what you think.”
The signals were there. At 8:15 (Pacific) we had a nice .618 pullback to a trendline created from Monday’s high to today’s opening bar. Stochastics were overbought, and there were three possible entries. (1) a break of the moving averages, (2) a break of the rising yellow trendline, and (3) a break of yesterday’s low (which was also the first hour’s low.) It was five points or more before the first pullback.
If you were expecting an even larger move, the DIVERGENCE between 10 and 10:30 was a warning of potential reversal. The rest of the day was a climb back into the morning range.
